Senior Tories hint at compromise on 'level playing field' to give Boris Johnson room for trade deal

Senior Conservative MPs have signalled they could accept maintaining current EU standards as the price of a trade deal, as a minister said the issue remained the "most difficult" part of the negotiations.

While Brussels is seeking to prevent European businesses from being put at a competitive disadvantage, Boris Johnson is resisting efforts to tie Britain to the bloc's rules and regulations in future.

The row is centred on the so-called "level playing field", which would ensure that both sides maintain a common set of rules and standards after the transition period ends.

However, indicating that Tory MPs could give Mr Johnson wriggle room to strike an agreement, a member of the European Research Group (ERG) said they could potentially accept a commitment not to lower standards below the current baseline.

The comments are likely to be welcomed by Downing Street, which is said to have accepted the need for non-regression clauses preventing it from undermining standards already in force.

But others in the ERG have pushed back against the suggestion, describing it as "completely unacceptable" and insisting they will not support any move which "dilutes" the UK's sovereignty.

Another Brexiteer added that while they could not accept "rigid non-regression", their support would depend on the "deal as a whole".

They also suggested that "compensatory clauses", whereby the UK would effectively be able to pay to diverge from EU rules in future, could prove "acceptable".

Under similar proposals floated earlier this year, it was suggested that both sides could consider any regulatory changes made by the other, without being legally bound to adopt them.

In such a scenario, the party raising its standards could seek adjudication by an independent expert panel if it felt it was being placed at a competitive disadvantage by the other's refusal to follow suit.

If the panel ruled in its favour, the other side could be given another opportunity to raise its standards or to conduct other remedial action, such as providing financial compensation.

Meanwhile, members of the ERG also indicated that they would back a transition period for repatriating fishing quotas to UK fishermen.

Lord Frost, the UK's chief negotiator, has offered the EU a three-year period which would see the bloc's share of the catch decrease over time, while also allowing the UK fleet to gradually rebuild.

However, Brussels, pushed by France, has asked for a 10-year transition and offered to repatriate just 18 per cent of the fish caught to the UK.

Speaking to The Daily Telegraph, one Brexiteer said the EU's original offer was "frankly ludicrous" but indicated that an offer over "50 per cent" could be enough to secure their backing.

"The position is that the UK domestic fleet hasn't got the capacity to fish all our waters now ... as a result of the Commons Fisheries Policy," they added.

"The fishermen are entirely happy that there should be a glide path into full control."

However, the two sides appeared still to be far apart on the level playing field on Monday night, with the UK resisting EU demands that European companies could challenge the Government in British courts if commitments on tax, subsidy law, the environment and labour rights were breached.

The EU wants the UK to set up an independent regulator to oversee bailouts and mergers, which Brussels says must be notified before any action.

Britain only wants the regulator to be involved after any subsidy and only then if it can be proved to distort competition.

Michel Barnier, the EU's chief negotiator, has also called for a swift-acting system, which would respond to any divergence with "lightning tariffs" if the European Commission decided it put European businesses at a competitive disadvantage.

British negotiators reacted with disbelief to an EU demand, which has been dubbed the "ratchet clause", which could see Britain penalised if the EU raised standards and it simply kept its rules the same.

The UK has also ruled out any system that would allow the EU to retaliate across sectors, for example by imposing tariffs on trade if there was a dispute over fish.

EU sources insist a robust governance system is necessary and point to the distrust caused by the Internal Market Bill.